Directors at Tesla have agreed to pay back a staggering $735 million to settle a lawsuit claiming that they paid themselves far too much in stock options between 2017 and 2020.
The suit was brought in 2020 by a retirement fund, the Police and Fire Retirement System of the City of Detroit, that holds the EV-maker’s stock, the plaintiffs arguing that the award of around 11 million stock options in the three years from 2017 was grossly excessive.
Though court documents say the directors claim to have acted in good faith and in the best interests of Tesla’s shareholders, they opted to settle the case “to eliminate the uncertainty, risk, burden, and expense of further litigation.” As a result, directors including Larry Ellison, the co-founder of software giant Oracle, James Murdoch, son of media tycoon Rupert Murdoch, and Tesla CEO Elon Musk’s own brother, Kimbal Musk, agreed to return 3.1 million Tesla stock options. The deal is believed to be one of the largest shareholder settlements of its kind.
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Bloomberg reports that shares valued at $458,649,785 plus $276,616,720 in cash will be returned to Tesla, and that the directors have agreed to forgo compensation for 2021-23 and will hire an independent consultant to help determine pay awards in future.
Tesla’s defense during the case was that the period in question coincided with rapid growth for the automaker, which sent its stock price soaring, along with the value of stock options awarded to directors.
Of note is that Tesla CEO Elon Musk isn’t affected by the judgement. His mammoth $56 billion renumeration package, the largest ever recorded, is the subject of a separate suit that went to trial last year, and which is expected to conclude soon.